Devo Deals - Sheffield, North East and Tees Valley signed

We are beginning to see Devo Deals take shape - all subject to the outcome of the Autumn Spending Review, and the progress of the Cities and Local Government Devolution Bill (CLGD) through Parliament.

Sheffield City Region's devolution deal was the first agreement to be announced out of the 38 UK-wide proposals, submitted before the 4 September deadline. Then George Osborne - showing continuing confidence that real growth and change can be achieved in the Northern Powerhouse - signed two further proposed agreements with the North East Combined Authority and with the, still to be established, combined authority for Tees Valley.

Notable parts of each Devolution Deal - specifically transport issues - will depend on a new, directly elected regional Mayor - who (after election in accordance with CLGD) from 2017 will have responsibility for a consolidated, devolved transport budget, with a multi-year settlement to be agreed at the Spending Review in November.

In addition an Investment Fund - under the broader control of the Combined Authority - is proposed for each region to cover capital spend in regional growth and housing projects.

With each deal, it is possible to see the Government's devo thinking develop further. For example the Sheffield deal speaks of starting a pilot scheme in 2016 to enable the Combined Authority to retain 100% of any additional business rate growth beyond expected forecasts, and "wider localisation of business rates with the Sheffield City Region Combined Authority." In the North East deal, the proposal is to place a supplement on business rates to fund infrastructure, "up to a cap". The Tees Valley deal provides more detail on the concept of five year gateway reviews (also provided for in the Sheffield Deal), to be initiated by the Cities and Local Growth Unit to measure the economic impact of Investment Fund projects in the region.

Borrowing powers are flagged in each deal. Clause 10(3) of CLGD allows the Secretary of State to specify which functions of a combined authority may come within the scope of borrowing powers given by the Local Government Act 2003. Will such borrowing be prejudiced by the five year gateway reviews? Any borrowing by a combined authority will be under the same prudential borrowing regime that applies to local authorities, and may therefore need to consider the potential impact of the five yearly reviews on the revenue stream against which the combined authority is prudentially borrowing.

Each Devo Deal reflects the demographics of the region involved - Tees Valley in particular gains support for its industrial carbon capture and storage projects, and for mitigating the effect of significant industrial closures. The Government will provide support to Tees Valley and Sheffield to attain intermediate body status for European Regional Development funding. All deals recognise the importance of human capital, and in particular the importance Sheffield has placed on apprenticeships and skills provision, and the continuing support shown by its private sector in initiatives such as the Advanced Manufacturing Research Centre. The North East proposal provides for a Rural Growth Network, and also puts in place building blocks for a joint commission with the NHS to start a process similar to that achieved in Greater Manchester - the first English region to get full control of its health spending, as part of an extension of its devolved powers.

All the proposals include initiatives to work more effectively with UKTI to boost trade and investment, and encourage greater exports from the Northern Powerhouse region.

Ultimately the Devo Deals recognise the principle that economic growth is a shared endeavour and each proposal commits the Combined Authority to "work with partners across the North of England to promote opportunities for pan-Northern collaboration, including Transport for the North, to drive northern productivity and build the Northern Powerhouse."

These Devolution Deals pave the way for further interactions with central government, and show that the Northern Powerhouse has inspired the confidence of government that it should increasingly not be required to work to a Whitehall template. The challenge now is for regions to keep in place powerful local champions who will ensure that these "in principle" agreements are made to work effectively in practice, and are backed by a set of effective statutory powers. We will continue to update you, as new Devo Deals are signed by the Chancellor and Northern Powerhouse authorities.

Share this

Authors

Partner

DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific, positioning us to help clients with their legal needs around the world.

DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa and Asia Pacific, positioning us to help clients with their legal needs around the world.